Standard Chartered: Egypt's Economy to Achieve In-depth Reforms

According to a report by British multinational banking and financial services Standard Chartered, the Egyptian government is on the right track to achieve comprehensive economic reform at an average growth rate of 5 percent of GDP as part of a reform program in cooperation with the International Monetary Fund (IMF).

The report said that the Egyptian government has managed to reduce debt levels by 17 points to about 86.3 percent of Gross Domestic Product (GDP) in June 2019, down from 103.5 percent in June 2017.

"Inflows from the tourism sector and remittances from abroad helped narrow the current account deficit," the report added.

The deficit is more likely to shrink further as a result of the increase in gas exports, as the Zohr field is close to operating in full capacity.

The report also expected inflation to settle at 11.1 percent in the fiscal year ending June 2020, allowing the central bank to cut interest rates further to support the local currency bond market.

"Egypt's total investment would outperform its peers in emerging markets, boosted by basic economic indicators despite volatile surrounding markets," the report stated.

Meanwhile, the decline of debt was the main focus of the Egyptian government. Egypt has announced an initial surplus of 0.7 percent of GDP in the first nine months of this fiscal year, expecting to achieve a surplus of 1.5 percent as a result of a potential increase in Q4 revenues.

Fiscal discipline is mainly reliant upon the reduction of fuel subsidies. A mechanism for fuel pricing has been put in place, leading to further reduction of subsidies in the fiscal year 2020. The Egyptian government is also committed to eliminating electricity subsidies by the next fiscal year. Non-tax revenues also increased significantly due to increasing Suez Canal revenues.

"The indicators of the Egyptian economy have improved within the framework of the IMF program over the medium term, so we believe that the IMF will continue to participate, through non-funded agreements such as the precautionary and liquidity line (PLL), or the Stand-By Arrangement (SBA), which will act as a Margin of safety for investors." Standard Chartered concluded.